The S&P 500 fell 0.4 percent to 1,776.01 at 1:10 p.m. in New York, headed for the lowest close since Nov. 12. The Dow Jones Industrial Average dropped 108.24 points, or 0.7 percent, to 15,735.29. Trading in S&P 500 stocks was 1.9 percent below the 30-day average at this time of day.

"We've had a lot of pretty good economic news lately and in the face of that data we're seeing the market starting to digest the exuberance it has had in 2013," Randy Bateman, who oversees $15 billion as chief investment officer of Huntington Asset Advisors in Columbus, Ohio, said by phone. "A lot of it might be in anticipation of the FOMC announcement next week and whether this good economic news is enough for the Fed to start its tapering process."

The S&P 500 has fallen 1.8 percent in the past three sessions after closing at a record on Dec. 9. The gauge fell 1.1 percent yesterday after a federal budget accord fueled speculation that the Fed may begin tapering bond buying earlier than forecast. Central-bank policy makers have been watching fiscal events in Washington and scrutinizing economic data to determine whether growth is robust enough to withdraw some stimulus.

Data Watch

Data today showed retail sales rose more than forecast in November as Americans bought cars and took advantage of discounts going into the holiday-shopping season. A separate report indicated applications for unemployment benefits jumped last week from an almost three-month low. The Bloomberg Consumer Comfort Index advanced for a third straight week as Americans grew more optimistic about the economy.

Data last week showed the jobless rate fell to a five-year low and the economy expanded in the third quarter at a rate faster than initially estimated.

"The economic news has been generally pretty good and the Fed has supposedly has been waiting for better economic news," John Carey, a fund manager at Pioneer Investment Management who oversees about $200 billion, said in a telephone interview. "There was an expectation a few weeks ago that the Fed might wait until February or March. But now with good economic news, it's starting to seep into the market that the Fed could start tapering earlier than that."

The Fed will probably start reducing its $85 billion of monthly bond purchases at its Dec. 17-18 meeting, according to 34 percent of economists surveyed Dec. 6 by Bloomberg, up from 17 percent in a Nov. 8 poll.

Annual Gain

The S&P 500 has surged 25 percent this year, poised for the best annual gain since 2003, as the Fed refrained from reducing its monthly bond purchases. Three rounds of monetary stimulus from the central bank have helped drive the equity index up more than 160 percent from a 12-year low in 2009.

The gauge has fallen 1.6 percent this month, leaving it on track for the first December decline since 2007. The final month of the year has been the second-best for U.S. equity returns, according to data compiled by Bloomberg that starts in 1928. The average gain for the month is 1.5 percent, more than twice the overall monthly mean of 0.6 percent.

"There will always be year-end adjustments," Bateman said. "We've had a strong year and a lot of the professional investors want to capture the returns they've experienced and to protect the strong moves as opposed to think the market will continue with the same buoyancy as we saw in 2013."

Volatility Gauge

The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options known as the VIX, rose 3.1 percent to 15.89, after yesterday climbing the most since Oct. 15. The declines have trimmed the measure's retreat in 2013 to 12 percent.

Oracle dropped 2.4 percent to $33.74. RBC Capital's Matthew Hedberg cut his rating on the stock to the equivalent of hold from buy and issued a 12-month price target of $35.

Cisco Systems Inc. fell 1.8 percent to $20.51 for a fourth day of losses that left the stock at its lowest since May. Chief Executive Officer John Chambers reiterated in a presentation to analysts that a slowdown in emerging-markets growth was a major reason why the computer-networking equipment maker missed first- quarter revenue expectations.

Lululemon lost 11 percent to $60.84. The yogawear retailer that named a new chief executive officer this week, said profit in the fourth quarter will be 78 cents to 80 cents per share. Analysts projected 84 cents, the average of 30 estimates compiled by Bloomberg. Delays in new merchandise hurt sales, the company said.

Facebook added 3.9 percent to $51.31. The social-networking company will replace Teradyne Inc. in the S&P 500 at the close of trading on Dec. 20. The addition to the benchmark index is a vote of confidence in the company, which met S&P's requirements after achieving a year of profitability.

Hilton Debut

Hilton Worldwide Holdings Inc. rose to $21.68, 8.4 percent above its initial public offering price. The world's biggest hotel operator raised $2.35 billion in a record IPO for a lodging company after selling about 117.6 million shares for $20 each, according to a statement yesterday.

JPMorgan Chase & Co. rose 0.3 percent to $56.21. The bank, which is the target of multiple U.S. Justice Department investigations, tentatively agreed to pay about $2 billion to resolve probes into whether it ignored warning signs about Bernard Madoff's crimes, according to a person briefed on the matter.

Global economic growth will accelerate at least 3.4 percent in 2014 from less than 3 percent this year as the euro area recovers from recession and China and other emerging markets stabilize, according to economists at Goldman Sachs Group Inc., Deutsche Bank AG and Morgan Stanley.

The upturn should prove bullish for equities and bearish for bonds. If it boosts corporate confidence in the durability of growth, it could further fuel demand, raising the odds that 2014 will break the pattern of recent years and come in better, rather than worse, than projected.

"So far it's been a very bumpy, below-par and brittle expansion," said Joachim Fels, co-chief global economist at Morgan Stanley in London. "Next year could bring a very important transition: a transition to a sounder, safer and more sustainable recovery."